Iraq steps up post-war revival

13 May 2024

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Recent signs of infrastructure project progress in Iraq have generated a renewed sense of optimism that certain major schemes may finally move ahead under the country’s post-war building initiatives.

Contract awards in Iraq’s construction and transport projects market reached $5bn in 2023, the highest value in the sector since 2012 and well above the average of $2.9bn over the past decade. The 2023 awards value was also a much-needed rebound from the disappointing value of just $1.4bn-worth of awards in the sector in 2022.

The sector has more generally been headed on a clear upward path, with awards averaging $3.4bn a year in the past five years (2019-23) compared to $2.4bn a year in the five years prior to that (2014-18).

Benefitting from higher oil prices and a period of relatively stable governance, Baghdad has shifted its focus to reconstructing and modernising Iraq’s deteriorating infrastructure.

The positive sentiment in the sector has been particularly buoyed by the robust 2023 budget, which outlined plans for substantial investments into transport, social infrastructure and housing initiatives.

Key infrastructure priorities for the country include advancing transport plans to capitalise on the expanding Al-Faw Port, including through the delivery of a north-to-south high-speed rail system—a proposal that has been under discussion for more than two decades.

Transport

As part of its 2023 budget, Baghdad approved 16 new projects, with an estimated value of nearly $17bn, for the development and construction of roads, bridges and overpasses in the capital. 

The schemes are part of the first package of the master plan revealed in December that included 150 projects intended to modernise and expand infrastructure, address congestion, and improve access and security in central Baghdad and inside the Green Zone.

One of the first contracts to be awarded was the $55m contract to build the Al Zafaraniyah Bridge project, which the Ministry of Construction & Housing awarded to Lebanese contractor Setraco in August 2023.

In a strong positive sign for market activity, Iraq floated tender notices in February 2024 for a combined $4bn-worth of contracts to develop the Baghdad and Najaf-Karbala metro projects on a design, build, operate, maintain, finance and transfer basis.

In April 2024, the country further advanced its infrastructure plans by signing a memorandum of understanding (MoU) with Turkiye, Qatar and the UAE to establish a framework for implementing a 1,200km-long Development Road project from Al-Faw Port to Turkiye.

While previous false starts on ambitious transport schemes such as these have eroded investor confidence in the country, there appears to be some hope that Iraq may have reached a tipping point leading to the most recent revival of projects.

One smaller, but still strategically important, transport scheme in the works is the $200m project to rehabilitate and expand Baghdad International airport, which is due to be awarded in 2025. In February, Baghdad also approved the construction of the $800m Diwaniyah International airport.

As the $5.8bn Al-Faw Grand Port masterplan – one of Iraq’s most significant ongoing projects – nears completion in 2025 after a decade of delays, it is also especially critical that new projects proceed to market.

Housing initiatives

Despite past efforts to boost supply, the housing shortfall in Iraq remains critical, with three million homes needed urgently and presenting a supply gap that is increasingly problematic for the government.

Between 2016 and 2020, Iraq reported 971 reconstruction projects, of which 718 were completed. 

Most recently, Iraq broke ground on the estimated $2bn Al-Jawahiri residential city project in Abu Ghraib, west of Baghdad. It selected East China Engineering Science & Technology Company and China National Chemical Engineering Company, in collaboration with the local Shams Al Binaa, as the main contractors for the project.

The Jawahiri project is part of a programme to construct five cities across Iraq, including Babil, Karbala, Nineveh and Anbar, to fill the country's housing shortages. 

Continuing the Iraq Housing Programme, which aims to build 3 million residential units in the form of low-rise buildings and townhouses nationwide, also remains pivotal for driving future construction activity.

Projects pipeline

Iraq has a total of around $86bn-worth of project work in planning and pre-execution across its construction and transport sectors. This is split roughly evenly between the sectors, at $43bn each.

It is hard to estimate how much of this value consists of work that will likely go ahead soon. Much of the value is still at an early stage, though $30bn-worth of construction projects and $41bn-worth of projects in the transport sector have on paper proceeded past study.

The immediate outlook for transport projects seems optimistic as the government continues to focus on economic revitalisation through expansive infrastructure initiatives.

These projects hold the potential to attract investors, stimulate local employment opportunities and generate significant revenues. The specific allocation of funds for vital metro and airport projects will also likely boost investor confidence.

There nevertheless remains a pressing need for major investments across other project sectors, including energy, utilities, construction and transport, to fully address infrastructural requirements and spur economic growth.


MEED's June 2024 market focus on Iraq also includes:

Al Sudani struggles to maintain Iraq’s political stability
Iraq economic revival faces headwinds
Iraq electricity sector makes slow progress

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Yasir Iqbal
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